Medtronic Could Be Hit with $221 Million Tax Bill over Covidien Buy

Qmed Staff

January 21, 2016

1 Min Read
Medtronic Could Be Hit with $221 Million Tax Bill over Covidien Buy

The medical device giant is prepared to settle a nearly one-quarter billion IRS bill with the IRS stemming from its $50B acquisition of Covidien.

Qmed News

Medtronic's $50 billion acquisition of Covidien will provide it with significant tax benefits, thanks to Ireland's business-friendly tax code. But the company also acquired a tax scuffle related to Covidien's former parent, Tyco.

Tyco recently announced that it has struck a tentative deal with the IRS that would require its 2007 spinoffs Covidien and TE Connectivity to pick up part of a a $525 million tax tab.

If the deal is finalized, Medtronic would stand to pay 42% of the $525 million, or $220.5 million.

TE Connectivity would stand to pay 31% of the total while Tyco would pay the remainder.

The deal was considerably less than the $2.8 billion that IRS had accused Tyco of owing in 2013.

The IRS accused Tyco in 2013 of owing as much as $2.8 billion stemming from deductions of interest payments from Tyco's U.S. income taxes for loans between its foreign-based businesses from 1997 to 2000, according WSJ.

In its statement to the SEC, Medtronic notes that it "does not expect to recognize any additional charges related to the tentative resolution."

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